Early Retirement - Help to Understand

[Barbara Bunter]

Hi,

I'm 45 and we're trying to work out whether me retiring early makes sense and to understand how that works.

I am a public sector worker who joined before 2004 and would have around 39 years' service at my retirement age of 60. My current salary is €100,000.

We have children, eldest 12. My spouse is full time in the private sector.

I find my job quite stressful so stepping back would be helpful. My spouse is supportive of this.

How does early retirement from the public sector work? I am trying to understand what my pension would look like?

Thank you,

Barbara

 

[Early Riser]

Some very approximate figures for illustration purposes. I am assuming that you pay Class A PRSI (post-1995 entrant).

If you retire at 60 ("normal retirement age" for your scheme) with 39 years service your Occupational Pension will be approximately €36,000 pa (plus lump sum of about €146,000). If you do not engage in other insurable employment, and are not eligible for a Social Welfare Benefit, you would be able to claim an additional Supplementary Pension of approximately €13,000 pa. This Supplementary would cease whenever you became eligible for a Social Welfare payment, eg, the State Pension.

You could take "Cost Neutral Early Retirement" (CNER) at any age from 50. But your pension will be based on shorter service and will then be "actuarially reduced" to reflect the longer time in payment. The earlier you take CNER the shorter your service and the greater the actuarial reduction.

As an example, lets say you take CNER at 55. You would then have 34 years service rather than 39. Your annual pension calculated for this 34 years service would be reduced to about 78% (along with a small reduction in the lump sum). Your CNER pension at 55 would be very approximately €24,000 pa (plus lump sum approximately €115,000). You would not be eligible for any Supplementary Pension between 55 and 60 (normal retirement age). At 60 you would be able to claim a Supplementary Pension (if you meet the criteria, as above), which should amount to about €12,300.

You could boost your potential pension in the meantime by way of an AVC scheme. In the event of early retirement this could be used to boost the tax free lump sum up to the Revenue max, with anything remaining going into an ARF. You could draw from this ARF between 55 and 60 if you wished.